Datwyler achieves profitable growth in a challenging environment
EBIT margin at previous year's level - despite strong franc and higher raw material prices
In the 2011 reporting period the Datwyler Group benefited from its strong position in global and regional niche markets. Despite the strength of the Swiss franc and the high cost of raw materials, the Group achieved further organic growth and was able to maintain profitability within its pre-defined EBIT target range. Good progress was made on various projects to expand the Group's global presence.
Organic revenue growth in all divisions
Owing to the European debt crisis and the resulting currency volatility, the Datwyler Group faced an uncertain operating environment in all markets and sectors. Although this raised challenges for planning, all four divisions were able to report astonishingly robust demand. By region, the markets in Germany, Eastern Europe and the emerging economies made the greatest contributions to organic revenue growth in all four divisions. Excluding exchange rate effects, the Datwyler Group as a whole achieved organic growth of 5.4%. The negative currency effect of presenting consolidated accounts in Swiss francs amounted to CHF 100.9 million or -7.6%. Thus, reported net revenue fell slightly by 2.2% year on year to CHF 1,290.5 million (previous year: CHF 1,319.5 million). There was no obvious uniform trend in seasonal developments in demand: whereas the Pharma Packaging and Sealing Technologies Divisions reported strong growth in the second half of the year, momentum in the Technical Components and Cabling Solutions Divisions slowed slightly.
Increase in operating profitability
The development in profitability was also impacted by the strength of the Swiss franc. While the average euro exchange rate in 2010 was CHF 1.38, the average rate in the year under review was CHF 1.24, a fall of 10.7%. This was not as extreme as in the case of the US dollar, which slumped by 15.1% over the past year. Excluding exchange rate effects, Datwyler's operating result (EBIT) for 2011 came to CHF 133.7 million, exceeding the figure for the previous year (CHF 127.9 million). The negative currency effect of presenting consolidated accounts in Swiss francs amounted to CHF 9.5 million. In addition to this so-called translation effect, the production sites at Altdorf and Schattdorf in Switzerland incurred a negative transaction effect of about CHF 8 million. Restructuring costs in the Cabling Solutions and Sealing Technologies Divisions and extraordinary income from the sale of property at the Schattdorf site were mutually offsetting. This slightly reduced the reported EBIT to CHF 124.2 million (previous year: CHF 127.9 million). Thanks to solid capacity utilisation and early implementation of measures to reduce dependence on the Swiss franc exchange rate, even in the challenging year under review the Datwyler Group met the target range for the EBIT margin that it set itself of between 9% and 12%. Despite significantly higher costs for raw materials, the EBIT margin of 9.6% was virtually unchanged from the result in the previous year (9.7%). Adjusted for exchange rate effects, the net result was also higher than in the previous year. Including a currency loss of CHF 8.0 million, the Datwyler Group reported a net result of CHF 96.2 million (previous year: CHF 98.2 million).
In view of the intact perspectives, solid profitability, free cash flow of CHF 83.1 million and the further strengthening of the balance sheet with an equity ratio of 72.1% (previous year: 68.9%), the Board of Directors will propose an unchanged dividend of CHF 2.20 per bearer share and CHF 0.44 per registered share to the Annual General Meeting. This is equivalent to a slightly higher payout ratio of 35.3% (previous year: 34.6%).
Current growth projects
In the year under review Datwyler continued to systematically expand and consolidate its market position. Thus, progress on the various projects to expand the Group's global presence announced during the year continued according to plan: its own plant in India for the Pharma Packaging Division, its own plant in China for the Sealing Technologies Division and new sales offices in Dubai and Moscow for the Cabling Solutions Division. Furthermore, in China Datwyler is about to realise its goal of entering the market for pharmaceutical packaging components. In the Technical Components Division the planned acquisition of the Dutch company Display Elektronika BV as per beginning of April 2012 will provide further impetus for the regional expansion of Distrelec and Elfa Distrelec's online/catalogue distribution. Display Elektronika BV has to date generated annual sales of around CHF 3 million. In the Sealing Technologies Division Datwyler was able to substantially expand its successful collaboration with Nespresso. An additional five-year agreement will result in the creation of about 50 new jobs at the Schattdorf site in Switzerland. With the acquisition of the profile business of Phoenix Dichtungstechnik GmbH, Datwyler has become one of the leading providers in the global growth market for special seals and tunnelling gaskets.
Measures to improve efficiency
Besides expanding Datwyler's market position, the acquisition of the Phoenix profile business creates the opportunity to optimise production structures and improve efficiency. By mid-2012 Datwyler will have concentrated its extrusion production at the new German site in Waltershausen. This will enable us to further reduce our dependence on the exchange rate of the Swiss franc. The relocation of elevator cable production to China and cable assembly operations to the Czech Republic announced in early 2011 have already reduced the impact of the Swiss franc. Both projects are proceeding according to plan and should be completed by mid-2012. At the same time Datwyler is modernising the cable plant in Altdorf, for which the Group is investing CHF 30 million between 2011 and 2013 in a high-tech production plant for high-quality data and safety cabling. A major project in the year under review was the Group-wide introduction of the new corporate identity with a view to strengthening the Datwyler brand. As part of this development, the Pharma Packaging Division has also adopted the Datwyler brand (previously Helvoet Pharma), a step that has been well received internally and externally. Further synergies were achieved in the financial field with the introduction of a treasury platform and the hedging of loans.
Equipped for all scenarios
Although visibility remains limited, Datwyler is fundamentally optimistic about the future. On the one hand the past three years have demonstrated that our Group's operations are healthy, continue to grow in challenging times and generate solid results. Packaging components for the pharmaceutical industry and the partnership with Nespresso provide the Datwyler Group with a non-cyclical basis for ongoing growth that is largely independent of general economic developments. On the other hand, we occupy a strong position in attractive niche markets. Sooner or later the general economy will recover, and we are convinced that when it does the Datwyler Group will benefit disproportionately. In addition to organic development, Datwyler will take advantage of any available opportunities to make acquisitions that fit into its strategy. The focus thereby is on growing online/catalogue distribution in Europe and expanding the global presence of the Pharma Packaging and Sealing Technologies Divisions.
Positive impulses for 2012
Working on the premise of a stable environment, we are confident that the Datwyler Group will continue to grow in 2012 and again fulfil its goal of an EBIT margin within the target band of between 9% and 12% that it has set itself. After implementation of all the measures agreed upon, less than 10% of Group revenues will be vulnerable to the transaction effect of the strong Swiss franc. Positive impulses are expected from the first-time consolidation of the Phoenix profile business and the expansion of the collaboration with Nespresso. Additional growth potential could arise from the expected conclusions of ongoing acquisition projects. In addition, the 2012 operating result will benefit from the planned sale of property in Canton Uri.
The figures in the German version of the Annual Report 2011 are binding. The Annual Report as well as this Media Release contain forward-looking statements. They reflect the Group's current expectations regarding market conditions and future events and are therefore subject to a number of risks, uncertainties and assumptions. Unanticipated events could cause actual results to differ from those predicted in this communication and from the information published. All forward-looking statements contained herein are qualified in their entirety by the foregoing.
Dätwyler Holding AG
The Datwyler Group is an international multi-niche player dedicated to industrial component supply and distribution of engineering and electronic components. Its activities concentrate on attractive niches that offer opportunities to increase value added and sustain profitable growth. Datwyler's four divisions - Technical Components, Pharma Packaging, Cabling Solutions and Sealing Technologies - are focused on the manufacturing, pharmaceutical and datacom industries. Their strategy is built on delivering innovative solutions and positioning themselves as a competent development partner for customers. With more than 40 operating companies, sales in over 80 countries and some 5,000 employees, the Datwyler Group generates some CHF 1,300 million in revenue. Datwyler has been listed on the SIX Swiss Exchange since 1986 (security number 3048677).